The Mukesh Ambani-led Reliance Industries and partner BG Exploration and Production received a shot in the arm with the Supreme Court on Wednesday holding that only British courts had the jurisdiction over the ongoing arbitration between the company and India's oil ministry over the former's demand for reimbursement of royalties and taxes in the Panna, Mukta and Tapti (PMT) gas fields.

Besides, it ruled that any final arbitral award can be challenged only in the British courts, but substantive Indian arbitration laws will have to be applied by the foreign courts. The British courts will also look at India public policy while deciding the issues, it added.

The international arbitrator in 2012 said the companies' claim in respect of royalties, cess, service tax and CAG audit as arbitrable and also directed the government to reimburse them to the tune of $11.4 million, besides “additional cess” recovered from them. The arbitration panel comprises Christopher Lau SC, Justice BP Jeevan Reddy, former judge of Supreme Court of India and Peter Leaver QC and some aspects of the matter is still being heard by it.

The ministry of petroleum and natural gas had subsequently opposed arbitration proceedings in London, saying that the matter should be settled in an Indian court.

A bench comprising justices SS Nijjar and AK Sikri quashed the Delhi High Court's March 2013 order that upheld the government's stand that the HC has jurisdiction over the matter.

The ministry had moved the HC against the claims of BG Group and RIL for reimbursement of royalties and various taxes in the PMT fields. RIL and partner BG had originally approached the apex court for settlement of issues with the government through arbitration in London. PMT fields' current production hovers around 6-7 mmscmd of natural gas and around 22,000-23,000 barrels of oil per day (bopd).

RIL had argued that the parties had agreed that the seat of arbitration would be London and that the Uncitral Rules of 1976 would apply; thus courts in India have no jurisdiction to decide the matter and only courts of England have an exclusive jurisdiction in this regard. According to the Ambani firm, Part II of the Arbitration and Conciliation Act 1996 does not empower the Indian courts to set aside a foreign arbitral award.

As per the terms of the arbitration agreement the courts of the seat would exercise exclusive supervisory jurisdiction over any